Saudis Won't Shed Any Tears Over DohaSaudis Won't Shed Any Tears Over Doha

According to NaftEMA, these increases offered Saudi Arabia the perfect excuse to refuse to freeze its own output. The kingdom's spokesmen, whether Deputy Crown Prince Mohammed bin Salman or oil minister Ali Al-Naimi, have said repeatedly that Saudi Arabia was prepared to act to support oil prices only as part of a broad coalition of the major oil producers inside and outside OPEC. Without that joint action, the kingdom, like other producers, will act in its own interests.The two months of preparation for the Doha meeting contributed to a 35 percent run-up in crude prices and that's probably about as much as Saudi Arabia was comfortable with. It might have been enough to prevent some small U.S. shale producers from sinking but was too little to prompt the big and expensive projects also in Saudi sights. After this weekend's failure in Doha, oil prices will probably give up much of that gain anyway. CHEAP, BUT EFFECTIVE The kingdom launched OPEC on a policy intended to shake high-cost oil out of the market in November 2014. To date that policy has cost producers an estimated $315 billion of their foreign-exchange reserves. Throwing high-cost producers a lifeline just as the policy is beginning to deliver concrete results would be to pour those billions of dollars down the drain. By prevailing with the policy, that money -- and the billions more that will have to be drawn down before the market re-balances -- becomes an investment in securing future market share for low-cost production.And the policy is working. The International Energy Agency sees non-OPEC oil supply falling by 1.1 million barrels per day between the fourth quarter of 2015 and the fourth quarter of 2016. Six months ago it saw the drop at just 400,000 barrels. And three months before that, in July when it published its first detailed forecast for 2016, it actually saw non-OPEC output rising by 0.5 million barrels per day over this year. Policy in Action With oil production still running ahead of demand, this would be an odd time for the world's low-cost producers to throw a lifeline to high-cost rivals. Having been drawn into a process that flies in the face of all it's worked for over a year and a half, Saudi Arabia probablywon't shed any tears as it falls apart. http://www.bloomberg.com/gadfly/articles/2016-04-17/saudi-arabia-won-t-she-tears-over-doha-oil-failure